Oil prices edged higher on Wednesday, extending gains as rising tensions with Iran fueled concerns about supply disruptions and as U.S. inventory data showed a much bigger than expected drop in crude stockpiles.
Brent crude futures LCOc1 were up 20 cents, or 0.3%, at $64.03 a barrel by 0300 GMT, after rising nearly 1% on Tuesday.
U.S. West Texas Intermediate crude CLc1 were up 23 cents, or 0.4%, at $57.00 a barrel, having risen about 1% in the previous session.
U.S. crude stocks fell more than expected in the week to July 19, declining by 11 million barrels to 449 million, the trade group American Petroleum Institute said on Tuesday.
That compared with analysts’ expectations of a decrease of 4 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 448,000 barrels, although gasoline stocks rose by 4.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 730,000-barrel decline.
The U.S. government’s official figures are due Wednesday morning.
The potential for renewed Sino-U.S. trade talks also helped bolster prices, analysts said.
White House economic adviser Larry Kudlow on Tuesday called it a good sign that top U.S. officials would be traveling to China to discuss reviving stalled trade talks.
“The possible nearing of a trade deal provided a strong bid for risky assets, lifting oil to its third consecutive gain,” Edward Moya, senior market analyst at OANDA in New York, said in a note.
Meanwhile, signs of rising tensions in the Middle East offset a weaker global growth outlook from the International Monetary Fund, which had kept prices largely flat for much of Tuesday’s session.
A U.S. Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the U.S. military said on Tuesday.
“We are confident we brought down one drone, we may have brought down a second,” General Kenneth McKenzie told CBS News in an interview.
Iran last week said it had no information about losing a drone.
Also fuelling tensions, Britain gained initial support from France, Italy and Denmark for its plan for a European-led naval mission to ensure safe shipping through the Strait of Hormuz following Iran’s capture of a British-flagged tanker.
“Britain’s request, rather than Washington’s, makes it easier for Europeans to rally round this,” one senior EU diplomat said. “Freedom of navigation is essential, this is separate from the U.S. campaign of maximum pressure on Iran.”
